It costs $9.99 to download library titles such as "Dumbo," "Pirates of the Caribbean: The Curse of the Black Pearl," "Shakespeare in Love" and "The Incredibles." Films sold in advance or during the week of a DVD's release go for $12.99, then the price rises to $14.99.
Viewers can initially watch downloaded movies on their iPods, new versions of which offer enhanced resolution and brighter colors. Early next year, Apple will sell its set-top box for $299, using a wireless home network to fetch the downloaded movies, TV shows or other video content from the computer and display it on the TV. It will work with either Macintosh or Windows computers.
Robert Iger, president and chief executive of the Walt Disney Co., said studios realize they need to meet the consumers where they are. Disney is Apple's first studio partner to deliver online movies, a logical teaming considering that Jobs became Disney's biggest shareholder when it acquired his Pixar Animation Studios.
"You can't stop or slow down technology," Iger said. "If you try to prevent that, unfortunately you fail."
By showing his hand, Jobs is borrowing a time-honored Microsoft trick: inhibiting purchases from rivals by announcing a product that won't reach stores for months.
Connecting TVs and PCs is not a new effort. Microsoft, for instance, has been trying for years to gather an audience for its Windows Media Center Edition software, which allows users to record and replay shows on computer as with a VCR.
A Microsoft spokesman said it has sold more than 16 million copies of Media Center Edition but -- its most popular form of media center by far is the Xbox 360, the game system that can connect to the PC wirelessly to display photos and access recorded TV programs.
"If you want all that and more for the same price -- $299 -- get a 360," said Microsoft's Adam Anderson. "And check this out: It's available today."
Michael Gartenberg of Jupiter Research said Apple's announcement raised the competitive stakes for Microsoft, which needs to not only offer a competitive digital music player and a compelling service but also find a way to differentiate itself from the industry leader.
"It'll be interesting to see how Microsoft responds," Gartenberg said.
